JOHANNESBURG — The management team and the chair of the beleaguered Steinhoff team has had to eat humble pie in Amsterdam as it met investors and shareholders in an awkward annual general meeting. The acting chairperson of Steinhoff’s supervisory board Heather Sonn likened the damage at Steinhoff to a “burning building”. It was the most anticipated AGM of the year. Meanwhile, Markus Jooste, the man at the centre of the scandal, has been nowhere in sight as he’s left the wreckage for others to take care of. – Gareth van Zyl

The owner of Conforama in France and Pep clothing stores throughout Africa said an investigation by auditors at PwC is well underway and had already uncovered the inflation of income and asset values over several years. More than 320,000 documents have been studied and 4.4 million records gathered in an attempt to find out what happened and who’s to blame, Steinhoff said.

“There was a time in early December that it could be likened to finding oneself in a burning building,” Heather Sonn said at the retailer’s annual general meeting in Amsterdam, where the Stellenbosch, South Africa-based company is registered. “Typically when in a burning building you run out. Some stayed. We are happy some stayed in the burning building to help.”

Steinhoff was facing up to investors Friday in its first AGM since reporting a hole in its accounts in December. After laying out salmon wraps and fresh fruit juice, senior management gave an update on the state of the retailer’s finances and took questions on everything from debt levels to the reappointment of Deloitte LLP as auditors.

“We want to uncover the truth, show the world what has happened, prosecute any wrongdoing and reinstate trust in the company,” Sonn said. She reiterated that Markus Jooste, the former chief executive officer who quit when the financial irregularities were disclosed, has been referred to law authorities.

Finances Drained

The shares reacted wildly, soaring as much as 23 percent before paring gains to trade 2.5 percent higher as of 3:47 p.m. in Frankfurt, where Steinhoff moved its primary listing from Johannesburg in 2015.

“The market is telling you it’s turmoil, that there is so much rot there,” Bobby Snodgrass, who holds about 100,000 shares, said in Cape Town, where Steinhoff hosted a live broadcast of the event. Investors “were misled by a charismatic leader and everyone listened to him. Those that saw red flags were at the trough and didn’t want to upset the apple cart.”

Steinhoff’s financial situation remains “very challenged” and the company has been “drained of working capital,” the company said. Even so, liquidity has been assured for now after 750 million euros ($922 million) was raised. The retailer has sold stakes in South African companies PSG Group Ltd., KAP Industrial Holdings Ltd. and Steinhoff Africa Retail Ltd. to shore up its balance sheet, though it said the strategy is unsustainable and debt needs to be restructured.

“There are a number of technical breaches of covenants in our loans,” Commercial Director Louis du Preez said at the AGM. “We have engaged with lenders to ensure these technical breaches do not turn into formal default.”

Company Knowledge

Ahead of a vote to re-elect directors, Sonn said it was important to retain executives with knowledge of the company to ensure survival. All board members have agreed to quit immediately if they are implicated in any wrongdoing. Besides, finding outsiders willing to join Steinhoff isn’t easy under present circumstances, she said.

Steinhoff is seeking to extend a 750 million-euro loan maturing in August and issued out of Hemisphere International Properties BV, the group’s real estate arm, the company said. Several of Hemisphere’s original bank lenders have sold the Hemisphere loan at discount prices.

A review of Hemisphere completed this month showed that the portfolio’s value is 1.1 billion euros, compared with a previous book value indicated at 2.2 billion euros. The company has also engaged with lenders of Steinhoff Europe AG, the European operational holding, as 770 million euros of loans come due in July and August. It is also talking to holders of convertible bonds.